Brussels – emerging from the big sleep?

August 25, 2011

No, I’m not trying to be facetious about the big sleep….oh well, maybe I am but only slightly so. I’ve not been travelling at all during August but to judge from the ‘out of office’ messages I’ve been receiving the three or four week August holiday is still being enjoyed by many across Europe. Now there are slight signs of an awakening; a stirring in the undergrowth of Europe as people return to their homes and their desks. I am again receiving emails with content rather than the dreaded message, the gist of which is ‘I’m off enjoying myself and no I really won’t be thinking about what’s on your mind..….and that state of wilful disinterest will prevail for several weeks’.

I should of course acknowledge that some political leaders have broken their holidays – for a day or two at least – to show a face to the media and suggest that the levers of power are indeed being pulled with authority from the beach or the mountains or, as is the case for most of my fellow countrymen, the Tuscan villa or the gite in France.

Meanwhile there is a huge crisis throughout Europe. About that I will not attempt to blog other than to suggest that, as a committed European but deep sceptic about the foundations of the eurozone, I am not the least bit surprised.

The EACT and the corporate community in Europe have their own treasury management crisis to handle. Actually the community has of course several to face but the one I am most preoccupied with today is the threat contained in the CRD IV proposals (already on the table) and the changes to MiFID (not yet published but due in the coming months). I blogged about this earlier and the threats I highlighted then have not gone away.
The EACT is sufficiently concerned about these threats that we are mobilising to produce once again an open letter to the EU Commissioners and others in Brussels. We have done this before; in January 2010 a similar open letter was signed by more than 160 European companies and I would like to think this acted as a catalyst for ensuring that a more sensible approach to the European regulation of derivatives (EMIR) has slowly emerged.

The focus of the new letter is not just on the risks that CRD IV and MiFID will undo all the good that was negotiated into the derivatives regulation through the corporate end user exemption. We particularly want the letter to highlight the continuing failure of Brussels to engage properly with the real economy in its approach to financial regulation. The voice of the financial sector has been powerful for too long, even if now seriously discredited in the eyes of politicians; this has encouraged what often looks like a blind eye approach to financial regulation, in which its impact on the real economy is relegated to become an afterthought.

In the US the Chairman of the Federal Reserve and the Acting Comptroller of the Currency have acknowledged that they cannot know the overall effect on the real economy of all the changes that are being made. I see no reason to expect the position in Europe to be very different. The real economy generates employment, drives the demand for productive investment and will always be critical to economic growth. The financial sector by contrast creates uncertain employment for many and has little interest in investment in good old-fashioned productive capacity. I won’t enter into the debate about the true value-added of much of the financial sector but you can probably surmise my views.

We are currently collating names for the open letter and I am hopeful that with the return from holidays underway we will have a powerful list capable of underlining to the Commissioners why a more open debate is still needed in Brussels on financial sector regulation.